The value of cryptocurrencies has fallen anywhere from 70% to 90% in the last few months, and in some cases values have gone to zero. But that doesn't mean the crypto revolution is over. In the last two years, the crypto industry has improved technology and proven to be product-market fit, and built a critical mass of users and developers.

For investors looking to get into cryptocurrency now, it's important to understand what kind of asset you're buying, what the opportunity is, and where there's value in the marketplace. If you put the industry's tailwinds behind you, this could be an investment opportunity of a lifetime. 

Product-market fit

A lot of the crypto industry was built on the idea that decentralization would somehow disrupt the centralized tech giants of today. But it's tough to build a business, much less an investment thesis, on decentralization alone.

The cryptocurrencies that are gaining the most traction in the marketplace are finding ways to generate value in both the digital world and the real world. Ethereum (ETH 6.38%) has had non-fungible tokens (NFTs) sell for millions of dollars. The blockchain has a huge lending ecosystem and more developers than any other cryptocurrency. 

Solana (SOL 6.28%) was built on the idea that low-cost, fast transactions were the future of the blockchain. It has more users than any other blockchain today, and there are use cases that seemed unimaginable months ago. Solana Pay could disrupt the credit card industry and reduce fees that currently go to Visa and MasterCard, helping business owners and shoppers. The Solana Saga smartphone is built on the thesis that the difficulty of using the blockchain can be overcome by designing the right hardware and software that users will actually want to use. And developers in the Solana ecosystem are building innovations that once seemed unimaginable. There are metaverse concepts, and there are also projects building utility from the blockchain in the cannabis industry, digital photography, and even professional sports.

Blockchain ledgers and cryptocurrencies won't be good for everything, despite what some crypto enthusiasts might think. Still, they will open up new opportunities for entrepreneurs to generate value that was once impossible. Product-market fit is here.

Where the opportunities are today

There are some foundational concepts any investor should think about when buying into a cryptocurrency.

  • Are people actually using a cryptocurrency and related blockchain? 
  • Are developers building apps around the blockchain?
  • Are investors like venture capitalists investing in new businesses that are innovating on the blockchain?

If the answer is yes to all of these questions, then investors likely have an opportunity to make money in the long run.

Ethereum and Solana are the two leaders in developers and users, followed by BNB Chain (BNB 7.45%) and Polygon (MATIC 12.04%), according to A16Z's State of Crypto paper. They're building a lead that may be insurmountable at this point, and these four cryptocurrencies are where I would initially focus attention. 

The cryptocurrencies themselves aren't where disruptive innovations will take place; they're the foundational payment mechanism for the blockchain. It's what developers and innovators do on top of the blockchain that will be disruptive, just like the internet was nearly 30 years ago. 

1995 all over again

There's a famous video of Bill Gates being interviewed by David Letterman in 1995 discussing the opportunity on the internet. In the clip, Gates is clearly excited about the opportunities for what can be built and the knowledge that can be shared among billions of people through this then-nascent industry. But Letterman clearly thinks he's insane for being bullish on a technology that seemed difficult to understand.

We know how this played out. The most valuable companies in the world today are internet companies. In fact, Alphabet wasn't even founded until 1998, three years after Gates' interview. But the internet did become a disruptive force to business and society, and investors had a tremendous opportunity if they got in early.

I think the same will be true for the blockchain. Payments, data, digital assets, and more will be stored securely on the blockchain, and cryptocurrency will be a medium of exchange for these assets. It's early, but this early-mover advantage is why right now is the best time to get into crypto.